Tesla Motors Inc (TSLA) China Strategy May Bring Knockoffs To Market


Apple was able to leverage its vast economic power to stop some of it, but intellectual property theft may not be so easy to solve for a smaller company like Tesla Motors Inc (NASDAQ:TSLA). The electric car maker has just started selling the Tesla Model S in China, a great achievement for the company, but it could lead to an influx of cheaper Chinese electric cars.

Tesla Motors Inc (TSLA) China Strategy May Bring Knockoffs To Market

The Tesla Motors Inc (NASDAQ:TSLA) Model S is sold on its cool factor. In China, that often makes a product ripe for copying. Over at Quora today, an anonymous author took a look at intellectual property problems in China. The company has already had a naming problem in the country, and it is likely that the car will be called the Tuosule there.

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Tesla and the Chinese market

Tesla Motors Inc (NASDAQ:TSLA) announced at the end of August that it was accepting pre-orders for the Tesla Model S in China. The move is a good one for the company. It gives it access to one of the world’s largest groups of wealthy people and establishes the Tesla Motors Inc (NASDAQ:TSLA) brand as a worldwide concern early in its history.

There are problems for any company trying to operate in China, however, as was addressed in the Quora post. Chinese companies have a habit of copying successful Western products from top to bottom. Other auto makers have seen their entire designs rebuilt in China and sold under a name oddly similar to their own. It is almost inevitable that this will happen to Tesla Motors Inc (NASDAQ:TSLA) in the country.

The question is how big of a problem counterfeits will really be. Apple Inc. (NASDAQ:AAPL) is still selling a huge amount of iPhones in China despite the astounding number of counterfeit devices on the market. According to the Quora post, those who can get their hands on a Tesla Motors Inc (NASDAQ:TSLA) car will. Those who cannot will opt for a counterfeit.

Tesla copycats

If electric car fever does take over in China, it could be the greatest boon to the industry since the release of the Model S. If the country manages to make decently performing electric cars for the mass market, it would be great for electric car uptake, though it could be very bad for Tesla Motors Inc (NASDAQ:TSLA).

Tesla Motors is a luxury brand right now. The cars it sells have a luxury experience and a luxury price tag. In China, that could play well with the country’s one million millionaires. It could also lead to the creation of copies like Apple Inc. (NASDAQ:AAPL) is dealing with right now. When Tesla takes a step down and tries to address the mass market, it might find it full of cars baring similar badges.

It is very difficult to predict how the Tesla Motors Inc (NASDAQ:TSLA) story will play out in China. Counterfeit cars are likely to be a problem, but the immensity of the problem is unknown at this stage. Going into China is still a net positive for Tesla.